Analysis: The latest migration numbers have complicated economic predictions, writes Q+A presenter Jack Tame.
Of all the weird and wacky data points illustrating our peculiar economy, perhaps the most overlooked is the number of people still arriving in and departing from New Zealand.
Yesterday’s provisional migration data for the 2023 calendar year shows net migration in New Zealand remained at a near-record level.
When all the migrants to arrive and depart were accounted for in 2023, we finished the year with an annual gain of 126,000 migrants – about the population of Dunedin.
While a few thousand short of October’s record, December was the seventh consecutive month where the annualised migration gain was above 100,000 people. For perspective, this is more than double the long-term average for the same annual period before the Covid-19 pandemic.
But at the same time we experienced record inflows of migrants, a record number of New Zealand citizens departed our shores.
With these points in mind, a critical question for the new government is what effect the migration figures are having on New Zealand’s inflation.
Although migrants contribute to both supply and demand (migrants usually work and they usually buy stuff), high migration is often associated with having an inflationary effect.
If migrant numbers are sustaining higher demand in our economy, the Reserve Bank will have a tougher time getting inflation back below 3%.
The housing equation
One thing is for certain: the net gain in migrants is certainly contributing to pressure in the housing market.
While the surge in foreign workers has been welcomed by employers who struggled with labour shortages through the Covid-related border restrictions, it’s easy to forget that all of those people need somewhere to live once they arrive in New Zealand – not to mention the other things like schools and healthcare that they need.
While migration surged throughout 2023, the number of new houses consented during the same period dropped by a record margin year-on-year.
Too much demand chasing too few places to sleep inevitably contributes to an increase in housing costs, even at a time when a one-year mortgage rate begins with a seven.
For anyone trying to pick the trajectory of our economy, it is yet another befuddling point to add to the mix.
At a time when many economists were picking cuts to the Official Cash Rate, New Zealand’s largest bank is now forecasting two additional increases.
And as one bank CEO told the NZ Herald this week, homeowners should “be prepared for any eventuality”.
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